does Miliband really want Tony Blair to explain publicly what he does as "special adviser" to JP Morgan? The former prime minister receives a reported £2.5m a year from the banking giant. Nice work if you can get it, and this is the kind of pay awaiting Cameron after he steps down.
One Barclays trader told a trader from another bank in relation to three-month dollar Libor: "duuuude... what's up with ur guys 34.5 3m fix... tell him to get it up!"
One of the most revealing exchanges in the Barclays documents came when a bank official tried to describe why Barclays’s improper postings were not as problematic as those of other banks. “We’re clean but we’re dirty-clean, rather than clean-clean,” an executive said in a phone conversation. Talk about defining deviancy down.
“Dirty clean” versus “clean clean” pretty much sums up Wall Street’s view of cheating. If everybody does it, nobody should be held accountable if caught. Alas, many United States regulators and prosecutors seem to have bought into this argument.
Justice will be far better served — and examples made — if prosecutors take an aggressive and creative look at whether they should try to put behind bars those responsible for manipulating what the world pays for credit and those above them who looked the other way.
There are really two different Libor scandals. One has to do with a period just before the financial crisis, around 2007, when Barclays and other banks submitted fake Libor rates lower than the banks’ actual borrowing costs in order to disguise how much trouble they were in. This was bad enough. Had the world known then, action might have been taken earlier to diminish the impact of the near financial meltdown of 2008.
But the other scandal is even worse. It involves a more general practice, starting around 2005 and continuing until – who knows? it might still be going on — to rig the Libor in whatever way necessary to assure the banks’ bets on derivatives would be profitable.
Due to the vast scale of this illegal activity, Libor lawsuits, fines and damages could be an existential threat to Barclays and other banks. Shareholders should forget about the damage to banks' reputations, which are already in the gutter. Instead, they should worry about the very future of the banks involved.
The next time an American political official is tempted to torture people or spy on Americans in violation of the law or destroy court-ordered evidence of wrongdoing — or the next time Wall Street executives are tempted to commit institutional fraud for personal enrichment — what incentives does anyone think will exist for them to refrain?
Basically, Barclays is saying that the Bank of England all-but explicitly advised it to lower its interest-rate reports to LIBOR, because otherwise people would get the impression that the bank was in lousy health, and that might create problems (via some kind of run). According to the Journal, Barclays went along with this partly because it felt that a lot of unhealthy banks were already submitting implausibly low reports, so it would be foolish to hold out.
We have allowed markets to evolve in ways that make supervision of markets almost impossible. Many instruments trade off-exchange or in multiple venues, making it nearly impossible for any single investor or regulator to supervise trading to prevent or detect manipulation or abuse. Many financial instruments are now synthetic compilations of underlying assets and derivatives, with multiple pricing components determined by reference to other prices or rates. Demutualisation and regualtory reforms stripped exchanges of the self-regulating interest in preventing manipulation and abuse by their members as mergers, profits and market share came to dominate governance objectives
The stakes are staggering. The Libor should be as good as gold. It pegs the value of up to $800 trillion in financial instruments. The collusion was systematic and routine. Investigations are underway not only in the United Kingdom but also in the United States, Canada and the European Union. Those named in the probes are all the usual suspects: JPMorgan Chase, Citibank, UBS, Deutsche Bank, HSBC, UBS and others. This wasn’t rogue trading, as the Economist concludes; it was more like a cartel.
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